ASIC puts onus on financial firms over remediations

The Australian Securities and Investments Commission (ASIC) says it’s putting the onus on financial firms to improve their performance in delivering fair and timely remediations in cases where money is owed to wronged consumers.

ASIC Deputy Chair Karen Chester says licensees must do better at identifying and remediating problems earlier to avoid the “costly lag and drag” of remediation, with underinvestment in systems a common stumbling block.

“This underinvestment has led to a trifecta of failures. First and foremost, in delivering on promises to consumers, second in identifying the failures and third in being able to remediate consumer loss in a timely way,” Ms Chester said.

ASIC last week released “Regulatory Guide 277 Consumer remediation” following a two-year consultation with consumer and industry stakeholders. It also updated a best-practice field guide.

“Going forward, while ASIC may need to intervene in some isolated cases, we cannot and should not oversee remediations in order for consumers to receive fair and timely outcomes,” Ms Chester said.

ASIC has overseen at least $5.6 billion in remediation for around seven million consumers for failures identified across the financial system over the past six years. Around a further $1.6 billion is yet to be paid to an estimated 2.7 million consumers in remediations the regulator is currently monitoring.

Large programs have included remediations in the insurance industry totalling more than $1.3 billion for mis-selling “junk” products, failing to deliver on price discount promises and poor sales practices, ASIC says.

“The release of our expanded guidance, along with the updated ‘Making it right’ field guide, delivers licensees all they need to achieve the right remediation outcomes on their own,” Ms Chester said.

“It explicitly allows the use of assumptions, to help firms address knowledge gaps and accelerate remediation programs in a way that does not disadvantage consumers.”

Consumer Action Law Centre CEO Gerard Brody welcomed the ASIC guidance, saying it should deliver more effective redress to people who have been mistreated, including people experiencing vulnerability.

“ASIC has listened to our calls to put the onus on industry to get on with fair and timely remediations – returning the money they owe to wronged customers – and this is good news,” Mr Brody said.